blog . invest  .

2 minutes reading time (427 words)

A Simple Free Money Secret That Every Investor Should Know About.

What are dividends?

To the patient and disciplined investor who stays the course during stock market storms: rejoice! Your pay month has arrived. December is usually considered a major dividend-paying month. Happy dividend-paying month! But what are dividends?

What are dividends?

In a previous post, we outlined two powerful engines that propel stock market wealth: capital gains and dividends. Dividends are essentially FREE money the stock or mutual fund gives you back for simply owning the stock or mutual fund. Think of dividends as the stock or company sharing its profits with its shareholders. There are dividend stocks (stocks that pay dividends) and dividend funds (funds that pay dividends, such as mutual funds and exchange-traded funds). Since mutual funds are composed of a "basket" of stocks, the fund will add up dividends received from each constituent stock to come up with a final dividend amount. Keep in mind that each constituent stock may issue dividends at different times. Also, understand that not every stock issues dividends.  

When are dividends issued?

Dividends are usually issued quarterly (every 3 months), but some companies or funds may pay dividends semi-annually (two times a year) or annually (once a year). For example, if a mutual fund pays $0.20/share every quarter and you own 100 shares of the fund, your quarterly dividend payment would be $20 or $80 for the whole year. 

What should you do with your dividends?

When you receive dividends from a stock or mutual fund, you have one of two options: buy more shares of the stock or mutual fund or cash out and pocket your earnings. Every investor has different investment style or objectives. Therefore, what you do with your "free" money is entirely up to you. 

[Related: 3 high-yield dividend stocks for the cheap investor.]

The bottom line

Nobody likes to see the common ebbs and flows or large stock market losses, but those who stay the course will always emerge victorious in the long run. One way calm and disciplined investors get rewarded is through dividends (or profit-sharing). If the company (stock) or mutual fund is profitable, it may decide to share the earnings with its shareholders. How will you use your dividends? Let us know in the comment section. 

Please share this article. Here are a few other articles you may find useful: 15 mind-blowing habits to make you super rich. One will spice up your marriage4 smart ways to both invest and pay down student debt | A simple portfolio to supercharge your returns | How to invest $50 | 10 shocking reasons why you will be broke at retirement.

Ready to start investing? Choose a platform below.  

We Invested $27,000 In 3 Large-Cap Growth Index Fu...
4 Different Types of Mutual Funds To Help You Dive...

Related Posts

 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Guest
Monday, 21 June 2021

Captcha Image

By accepting you will be accessing a service provided by a third-party external to https://newvestor.com/

Stock Screening Tool

Stock screening and investing made easy with Stock Rover. Discover your favorite stocks! Why Stock Rover? Disclaimer.

SPONSORED CONTENT

BECOME A FAN. SUBSCRIBE

Investing is for Everyone.

Investing is one of the best ways to build wealth quickly. Let's get you started below.

Investing can be intimidating when you're just getting started. Let's simplify it for you. Let's start with the building blocks.

Read our latest blog articles about investing, financial freedom and debt management. Give us your feedback.
Got $5, $50, $100, $1,000 or more? Investing your way up to financial independence is achievable.  Ready to get there?

#Featured Stories

#Sponsored Content

#Most popular

How to invest in real estate without buying properties.

Can you invest in real estate without buying physical properties? Yes, indeed! Here's your guide...

Poor? How to invest $50. Here's what we recommend.

Got $50 collecting dust? Get on the path to financial independence. Here's what to buy...

Cash is trash, not king. Invest your cash to build wealth.

Got cash sitting around? Being robbed by banks? Your money is losing value. Invest it to build...

#Product Reviews

Stock Rover: stock screener!

From stock screening and research to full portfolio analysis, we haven't found a more robust screening tool.
Read more

SoFi: Simple investing platform

Investing has never been so easier with SoFi. With a simple app, start investing in stocks, ETFs & Crypto.

Read More

Stock Rover: Stock Screener.

From stock screening and research to full portfolio analysis, we haven't found a more robust screening tool.

Read More

#Let's Invest!

Disclaimer: We may receive a commission for products or services you sign up for. Thanks! Full disclaimer.

#Get in touch.

Please fill out the form below. We will get in touch soon.

#Become a fan.

Subscribe for our latest updates, blog posts and investing tips. No spamming!